If you are considering divorce, realize that what you don't know about the divorce process can hurt you. And, what you think you know about divorce, may not be fact!
Myths about divorce abound. For one thing, divorce laws vary from state to state. So, quite often, people are confused due to what they have heard about celebrity divorces, or a friend or family member's divorce in another state. To help bridge this knowledge gap, I have compiled a list of ten facts about divorce that may surprise you.
1. You may be responsible for debts incurred by your spouse during the marriage.
Generally, debt incurred during marriage in order to provide necessities like clothing, food, etc. is considered joint debt in most cases. That means that each spouse shares the responsibility of paying back the debt. Debts from before marriage are a person's separate debt, and not the liability of a spouse. That being said, there are exceptions to these general rules that need further review with your attorney.
2. Everything purchased during the marriage, even in another state, no matter whose name it’s in, is typically considered community property.
Many people get confused about what is separate and what is community property when it comes time to divide the marital estate. Separate property is what is brought into the marriage, what is inherited during the marriage, or received as a gift during the marriage. So long as it is not mingled with the community property, it maintains its separate property status during divorce. If one spouse buys property or an asset during the marriage under his or her name it is still considered community property to be divided in a divorce.
Community property is all the property acquired during marriage, no matter whose name it is in and in which state it was purchased. In Texas, the income from separate property (such as a interest earned) is also considered community property although the appreciation in value of the underlying asset remains separate. For IRAs and qualified plans the rules are different. The appreciation on IRAs and qualified plans is considered community property, unless you trace the activity to separate community. Once again, make sure to closely examine your property/assets with an expert to be sure.
3. There is a form of alimony in Texas.
Court-ordered, spousal support, what most people call alimony, is very limited in Texas. It is referred to as spousal maintenance, and one must meet strict requirements to qualify. Be prepared to provide a detailed, projected post-divorce budget that demonstrates a clear monetary need if you plan to apply for spousal maintenance. However, one may be able to negotiate contractual alimony from a spouse that goes beyond what the law allows. A Certified Divorce Financial Analyst can assist in the preparation of this budget. Often the higher earning spouse receives more assets as an offset in exchange for providing alimony which will provide an income stream for the spouse.
4. It may not make sense for the custodial guardian of the children to keep the family home.
In many divorcing families, there is an emotional attachment to the family home. It's important to analyze what it will cost to pay the mortgage, maintain the home, and pay utilities. Retaining the home must be evaluated from a cost perspective, and compared to giving up other assets that may provide income or future appreciation such as investments. Additionally, the cost of alternative housing must be considered, whether renting or acquiring a less expensive home. Read more about the issue of buying a house during divorce here. A Certified Divorce Financial Analyst can help to answer this question before you commit to a settlement that cannot be changed.
5. Many Texas divorces never go to court.
Most divorce cases are settled out of court by agreement of the parties, either by negotiations through attorneys or through mediation. In the greater Houston area, family courts require all divorcing couples try mediation before going to court. If you are unable to reach a settlement agreement in mediation, you can take a break and try mediating again. Otherwise, both spouses will be required to attend court with their attorneys.
6. Texas divorce law does not support the common belief of splitting marital assets 50/50.
The State of Texas requires a "just and equitable" division of property. A 50/50 settlement is rarely appropriate and should never be implemented without the advice of an attorney, and ideally, using an analysis of the situation by a Certified Divorce Financial Analyst. The division of marital assets in a divorce should take into account the need for one spouse to receive sufficient assets to provide support considering the much higher earnings of the other party.
7. While I recommend retaining an attorney to assist in a divorce, it isn't a required by Texas law.
An attorney is not required to be involved in all aspects of a divorce case, and may be used as a consultant, incurring only hourly charges. But this can be risky if the case gets tricky or there are complex legal issues to hammer out. Going through divorce with only limited legal oversight requires the divorcing individuals to be very familiar with Texas divorce law. They must also gather and analyze all their own financial data. Alternately, couples in this situation may want to enlist the services of a Certified Divorce Financial Analyst and arrive at a settlement through a mediator.
8. If you have been married for 10 years or more, you are entitled to one-half of your spouse's Social Security after divorce.
Your spouse still retains his/her full Social Security benefit and if he or she marries, the new spouse will also qualify to receive half the Social Security as well. This is strictly determined by federal law and is not a negotiation issue in divorce. However, if you remarry, you lose this benefit.
9. "Courts do not get involved in dividing the pots and pans."
Most possessions and household goods hold "garage sale" value in a divorce. You would be wise to divide these items without paying an attorney or financial expert to get involved. I suggest my clients make a complete list of all possessions and then, take turns selecting items each of them wants. Remember to omit all items inherited or given as gifts to the other party. These are considered separate property.
There are some things that hold higher value like art, antiques, guns and other types of collections. These should be appraised. Cars and boats are typically valued using Kelly Blue Book online or another similar service. Home appraisal companies can be engaged to determine market value of the family home. If there is a dispute, each spouse is free to get a separate appraisal and then meet in the middle. If a privately-owned businesses is part of the mix, you may need an expert to determine its market value.
10. Working out an equitable settlement agreement may require the expertise of a Certified Divorce Financial Analyst.
In today's complex financial world of IRAs, 401(k)s, stock options, pension plans, executive bonuses, deferred compensation, supplemental executive retirement plans, and more, CDFAs offer a valuable service that most attorneys are not trained to provide. Gaining a clear understanding of all assets on the table is paramount to an equitable settlement. A CDFA can also advise on your options for choosing which asset mix will work best for you. He or she can also help you see how certain decisions made during the divorce process will affect you and your children in the short- and long-terms. Knowledge truly is power.
Join Patricia Barrett at upcoming Houston Leisure Learning classes on Aug. 25 and Oct. 27. She will also be presenting at the Guide to Good Divorce seminars in Houston on Sept. 27, 2014. For more information on divorce financial planning or divorce mediation, visit Patricia's website, Lifetime Planning.
The information in this column is provided as a guideline and offers a general overview. For more specific details on these topics, please consult a Board Certified Family Law attorney, or a Certified Divorce Financial Analyst.